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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: aldrums who wrote (12342)	3/13/2001 12:01:04 AM
From: LPS5	Respond to of 18137

Hi Al, Well, I'm not sure that I would give any advice to that effect, but let me say this: SIPC only covers losses due to financial failure; it doesn't, nor was it meant to, compensate due to losses arising out of bad investment decisions or fraud perpetrated by firm owners. It does its' prescribed job. Additional insurance may or may not be a good investment - that's a decision only you can answer. The best "investment" of all, and the greatest protection you can afford yourself on the cheap is doing a few days worth of due diligence on any firm that you put funds on deposit with. How many of you folks have looked up your broker-dealer's regulatory record - and, if not self-clearing, your broker-dealer's clearing firm as well - in the NASD/NYSE disclosure archives? With the SEC? Has the broker-dealer and/or clearing firm ever had to provide the SEC with a net capital early warning notice? (Check their regulatory history and, knowing the truth, then ask them: see if the answers jive.) Has a regulatory agency every required that they divest themselves of business lines to prevent potential net capital violations? Do you know the name of your BD's (and, if applies, clearing firm's) CEO/President/CFO? Done a background check on them with the NASD, NYSE, and/or SEC? You might also consider asking the firm for a copy of their Form BD to see who - besides the smiley-faced front people - actually owns the firm. These people might be worthy of regulatory background checks as well. (I wouldn't expect them to turn this over, though.) How many accounts do they have? When was the last time they received a customer complaint, and how was it resolved? What is their minimum capital requirement, as per their SRO requirements and business activities? And - if you dare - follow this question up by asking them by how much, on average, they exceed their minimum capital requirement in a given period... To that question, you may not get an answer...and it is arguably confidential...although it's my position that to the extent that their financial position can affect mine for years to come, I have a right to know that. If they don't/won't tell you, I believe that the SEC makes both Focus reports (reports indicating both required and actual net capital levels for specific broker-dealers) and the earlier-mentioned Form BD (giving all the ownership, etc. information pertaining to a broker-dealer) available to investors, though I'm not positive. Nor am I positive how one would go about getting these, though a call to the SEC could be enlightening. LPS5